It’s not every day that the CEO of a leading Italian men’s fashion house offers you espresso. But, knowing a shot of it would have me bouncing off the walls during the interview, I politely declined. In true Italian fashion, Gildo Zegna offered us a cup before we started our interview, aided by Ken Cress, president of the Asia-Pacific Zegna group, as they celebrate 20 years in China.
For the Zegna family, China was a dream country. According to Ermenegildo Zegna’s coffeetable book, his son Angelo was obsessed with the country. Even before they were old enough to join the family business, Angelo stressed upon his son Paolo (now chairman) and nephew Gildo (now CEO): “One of you has to learn (how to speak Chinese)!”
“Unfortunately, I didn’t make it,” Gildo laughed. “But I did learn German.” The Zegna family had the foresight and courage to jump early on the marketing train to China. “Having said that, we should have already mastered ‘Zegna’ as a brand machine for us to be successful in China. So my uncle’s dream came true.”
And now, Ermenegildo Zegna is living the dream in China. Twenty years ago, Zenga started off with a store inside a hotel. Today, it has 10 global stores in China. In an exclusive interview in Beijing to celebrate Ermenegildo Zegna’s 20th anniversary there, I learned why Gildo Zegna doesn’t need espresso to take on the world.
Small but swift
“In 1991, Zegna started with a relatively small but well-positioned store in the Peninsula Hotel in Beijing that was located right behind their concierge desk,” Gildo Zegna recalls. “This was the first lesson we learned in China: positioning, positioning, positioning. Anyone who checked into the Peninsula would instantly see our name and our store. For those who were yet unaware of the brand, this was a great way to quickly introduce them to the best luxury brand in the world.”
Along with positioning the brand, Zegna needed to also build its locations, retail stores and organization. They gradually expanded their luxury stores, primarily in high-end hotels and first- and second-tier cities. Then in 1997, they opened a full-fledged Zegna subsidiary in Shanghai to develop a base for a stronger organization and local capabilities.
In 2000, the luxury shopping mall emerged so we moved away from our hotel locations and moved into these malls which had the additional benefit of allowing us to expand the store’s dimensions. And as a result of our good positioning and brand awareness in the Chinese market, we were able to expand into second and third-tier cities, which has been one of the major reasons for our growth,” Gido says.
Own up to it
“Another strategic move that led to our growth was when we bought back Zegna’s franchising operations until we had full control of our distribution,” Gildo adds. “Controlling our distribution was key to driving our success. When we stepped back and looked at the bigger picture and saw how the other brands were having a difficult time with their business, we realized it was because they were not in control of their distribution. It was a bold move to clean up the house, but it was also a smart move.” They had to close some stores, and open in new sites with their own people.
China was a bigger step. “A lot of these brands coming to China have resorted to franchising as a business model. This is fine if the brand intends to cash in for the short-term,” he says. “But Zegna is a fourth-generation family business and we hope that the fifth generation will enter the business as well. Given this long-term vision, we invested heavily in China even during the global crisis when everybody else pulled back. We really went for it.”
As a result, Zegna has been able to grow an average of 30 percent a year over the past five years.
Going global
“When you are successful, half of it is being smart and the other half is being lucky. And we wouldn’t be where we are right now in the world of luxury in China and other countries without Peter Marino.” Marino, a master of retail architecture and design, designed the flagship Ermenegildo Zegna stores in Milan, New York and Tokyo, the Chanel Tower in Tokyo, and Louis Vuitton Maison in London, among others. Working with Gildo’s sister Anna Zegna (the company’s image director), they came up with a marvelous design for a “global” Ermenegildo Zegna store that first opened in New York and translated well to China.
“The Peter Marino stores made us step up as a men’s brand, not an easy thing to do in the world of luxury,” Gildo continues. “The ambiance and the size and the overall ‘wow’ effect of retail luxury helped us in enhancing the road to luxury. The fact that we are able to add pieces to our house (i.e. Zegna pens and watches) because of the Peter Marino-designed store is important as it made us raise the bar in every angle of the business. We would never have introduced our other luxury items if we didn’t have the store. The entire store design shows luxury — the store window, the store materials, the categorization of the items. It’s a whole new ballgame that brought us to a different level.”
By the end of 2011, there will be 10 global Peter Marino stores in greater China. “That gives us incredible exposure to the consumer.”
You can’t have too much luxury
“After testing our other luxury products like the Centennial fountain pen, the Centennial watch, Centennial cufflinks and the Centennial Vellus Aureum (Zegna’s wool mill had woven 20-cut lengths of the world’s finest fabric from the world’s finest ‘Vellus Aureum Trophy’ winning wool), we have seen such a strong reaction, it gave us the guts to continue moving in this direction,” Gildo says.
“We did not want this to be a one-time proposition. Thus, we made a commitment to create a hard luxury collection. For example, investing in the equipment for watchmaking is a long commitment, unlike fashion or technology.” If they hadn’t taken the plunge with greater China, Zegna would not have made that commitment, Gildo says. “In this market, you can’t afford to make a mistake because once you make a mistake, it is very easy to lose credibility. Thus you build your products one point at a time and it registers with the customer.”
China rising
The fact is, while the US and Europe are tightening belts, Asia is the up-and-coming consumer of luxury brands. “China has overtaken the United States as the number one luxury market for Zegna worldwide,” Gildo points out. “On top of that, we also enjoy being one of the top five luxury brands in China in terms of market share. Considering that Zegna is only a men’s brand, that is quite an accomplishment. But we achieved this position in the market as a result of 20 years of hard work, a disciplined approach and a strong organization.
“Our challenge now is to maintain our position,” he adds. “The competition is becoming tremendously fierce with regard to the war for talent and the ability to hold on to great real estate locations. Thus, we need to continue innovating if we want to maintain the customer’s interest over time and build the share of his closet.”
Over the past two decades, Zegna has seen dramatic changes in the Chinese consumer profile. “One of the complexities of doing business in China in today’s market is that you have to cater to different sub-groups,” Gildo says. “There is the core luxury customer who has been traveling the world and been buying luxury for the past 15 years and, as a result, has become very demanding and sophisticated when it comes to quality, details, function and service. He wants to be part of a special club. They don’t want to show on the outside the brand but they want to know that they are wearing something special for them.
“But we still serve a number of brand new customers who are new to the world of luxury. They’re looking for something that is more recognizable. We have complex super-sophisticated customers on one end, and aspirational customers on the other end.”
Confucius says
“Much of fashion today is too dark and too black,” Gildo says, sizing up current men’s styles. “But the Chinese like color and they have been influential in pushing for more color in the designs. Color is fun. Color adds value to your clothing.”
Zegna releases five collections every year. “But in China, we will probably have six collections because we discovered that there was a period of the year (May-June) when the shops were empty, so we needed something new. Thus, we created Winter Zero — a collection with winter color but with summer weight. And the market loved it as evidenced by how it helped us increase business quite substantially. The customer wants to have a season. Therefore, we cannot afford not having something new in the store when the customer pays a visit.
Location has also helped in Beijing. “Being situated in the right neighborhood the brand is looked at with the right eye and with interest,” Gildo notes. “The company must run like a Ferrari engine. As you can tell, I like cars and watches.”
I ask: Does that mean we might see an Ermenegildo Zegna car very soon? “Yes, a limited edition one!” Gildo says with a laugh.
The Double Helix of success
“The secret of our success lies in the DNA of the family,” Gildo continues. “One of the traits of our family, starting particularly with the founder Ermenegildo Zegna, Count of Monte Rubello, has been both his vision and his pioneering spirit. When Ermenegildo created the brand in 1937, he already linked the brand name of Zegna to the best fabric in the world with Italian design.”
Also, since many Italian tailors had immigrated to the United States at the time, the company founder was smart enough to travel to the States and encourage them to use Italian fabric for their suits. “That is truly a pioneering spirit,” he adds. “We wanted to emulate his vision and pioneering spirit by having the courage to think big in the China market.”
Looks like Zegna is a good fit for China. Says Gildo, “They love the quality of our Italian-made products and they like the genuineness of the Zegna story,” a family business that just celebrated its centennial. “Therefore, you have to follow it through with product quality, product innovation and, most importantly, service, service, service. Chinese customers have grown very sophisticated, so they demand the best customer service. To achieve that, you need to train your people, which goes back to the loyalty factor. It is all part of being a well-oiled machine.”
Back to the cars again. Or maybe the espresso machine.
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Thanks to Stores Specialists, Inc. and Visions and Expressions for arranging the interview.